Financial professionals often bring the most benefit to different profiles of prospects, and a major factor is their compensation system.
Insurance agents might be expected to focus on insurance. Professionals who sell stand-alone financial plans are seeking people prepared to pay a fee for a portable plan. Financial advisors seek prospects with a pool of money. The logic is simple: If they have a minimum asset requirement of $250,000 to open an account, there must be $250,000 or more in assets sitting somewhere.
As an advisor, where are you going to find these clients?
In "The Millionaire Next Door," by Tom Stanley and William Danko, the authors make the case that there are people who strive to appear rich (or we assume to be rich) who are not. There are other people we stereotype as not rich because of how they dress or the jobs they do. That also can be wrong. The person who lives in the same house, stays married to the same person and is happy keeping a dependable car may be richer than appearances suggest.
Wealth can be classified into four categories based on assets and cash flow.
- High Assets, High Cash Flow: Established business owners and professionals fit into this category.
- Lower Assets, High Cash Flow: This can include executives and managers who are not owners of the business.
- Higher Assets, Lower Cash Flow: These are the old-money set and retirees, especially if they sold their business.
- Lower Assets, Lower Cash Flow: This can include established families whose money might be gone, but prestige remains. This also includes the pretenders. This group is to be avoided.
A fifth category, Under the Radar, characterizes people outside the asset/cash flow mix: Think lottery winners.
High Assets, High Cash Flow
One of the most obvious are senior executives at listed public companies. These are the people high enough up the ladder to be listed by name in the company annual report. If you have a listed public company headquartered in your area, the C-suite executives live somewhere nearby. They are usually low profile.
Established successful business owners fit this description too. This can often be determined by the number of years the firm has been in business. If you look over the Chamber of Commerce member directory or the firm's website, you should see notes like: "The chamber thanks this 15-year member …" Which businesses have passed the 10-year threshold?
High-profit-margin businesses can often be overlooked. This category can be explored in detail by looking at the categories in the Chamber of Commerce membership directory and making some assumptions. You might think that owning a restaurant is glamorous, but the failure rate in restaurants is high. Research shows that 3 of 5 restaurants don't last longer than a year. On the other hand, jewelers and plant nurseries often do quite well.
Licensed professionals can make a lot of money. If they are smart, they put it away. Three obvious examples are doctors, lawyers and accountants. Plenty more professionals require holding and renewing a state license. If a license is required, you should be able to find a database showing who holds that license locally.
People running regulated businesses. Did you notice that financial advisors weren't mentioned under licensed professionals? I included this profession as a separate category because you have regulatory government authorities looking over your shoulder all the time. Sellers of alcohol and cigarettes are also highly regulated.
Lower Assets, High Cash Flow
You can make lots of money yet not own the business. As an advisor, you likely have friends who work in information technology pulling down fantastic salaries. If they work on contacts with a company, they know that their income can plummet when one contract ends and they are idle until their next posting.
People employed by someone else is a good description. They might be scientists, engineers or middle managers. If your college has an alumni club in the area, this can be a good way to find out who some of them are in the local area.
